Refunds for Fannie and Freddie aren't being given for bad bank lending options

The near collapse of real estate has been partially attributed to poor mortgage assets. As an investment and dividend bearing instrument, a loan lender or financial institution can sell a mortgage they originated to another institution. Some financial institution lending options went to people that wouldn’t have qualified with basic scrutiny, and some people’s mortgages went sour because of circumstances. Some of these lending options went down the drain for whatever reason, and since Fannie Mae and Freddie Mac bought a lot of them, so did Fannie and Freddie. Few of these bad loans are being bought back by the banks that sold them.

If requested the poor lending options must be bought back

It seems fair that if bad mortgages were sold on the market and seriously damaging the companies that bought the bad finance lending options, those loans should be bought back. If loans sold as securities become toxic and are foreclosed on, there is legislation that was passed that guaranteed lending options must be purchased back on request. Freddie Mac and Fannie Mae purchased a lot of these mortgages. However, the repurchases that are owed by law aren’t taking place.

There has not been redress of those sales

There have been a fair amount of the poor mortgage properties that are not getting repurchased. Fannie and Freddie have been asking for a refund from the corporations that sold the mortgages to them, according to USA Today, and about $11 billion worth is being sold back. Of the refunds requested for, a third of them are delinquent by about 90 days. Those aren’t the only businesses that purchased those securities. Other loans were backed by the Federal Housing Administration and the Veterans Administration.

That is really disadvantageous

The idea is that if the pay-backs are granted, the financial institution or loan company that sold the security will lose cash. However, that is really counterintuitive. Fannie and Freddie are being propped up with taxpayer dollars, and businesses as well as individuals pay taxes. The executives and employees of the financial institutions and other corporations that won’t buy back the properties can have to pay taxes until the debt for Fannie and Freddie is paid off.

Further reading

USA Today

usatoday.com/money/economy/housing/2010-09-15-fannie-freddie_N.htm